Similar letters sent to the premiers of all provinces. The letter to the premier of Quebec was in the French language.

Ottawa, January 6, 1956. My dear Premier: At the opening session of our October conference, I put forward certain general ideas which the federal government believed would form a reasonable basis for a revised approach to the question of federal-provincial fiscal arrangements. These ideas were further elaborated in our sessions in camera, with some statistical illustrations of how they might operate. We discussed these suggestions at some length at the conference and the general consensus seemed to be that they were worth careful study. We did not expect, nor did we ask the provincial governments to commit themselves on these principles at the conference, but at the closing session, I invited them to send in further comments or observations after they had had time for further consideration. Since the conference I have received formal communications from four provincial governments and there have been informal exchanges of views with other provinces, both between ministers and officials; all of these have been carefully considered. The federal government is now prepared to make a definite proposal and to recommend to parliament that appropriate legislation be passed along the following lines: 1. The federal government would make unconditional tax equalization payments to the provinces. In brief, these annual equalization payments would bring the combined per capita yield of certain standard taxes applied to the personal income tax field, the corporate tax field and the succession duty field up to the level of the average per capita yield of these taxes in the two provinces which have the highest per capita combined yields in these three fields. These equalization payments would be paid during each fiscal year commencing April 1, 1957, and would be calculated on the basis of the tax and population figures for the preceding taxation year. 2. During the currency of these arrangements, the federal government would also pay to each provincial government each year any amount required to bring the total yield of these standard taxes, plus the equalization payment, up to the highest of: (a) the tax rental paid or available to the provincial government in respect of the year ending March 31, 1957, increased by an amount proportionate to any increase in population of the province, from June 1, 1956 to June 1 of the taxation year in respect of which the equalization payment is made; or (b) in the fiscal year 1958-59, 90 per cent of the standard tax yield plus equalization and stabilization payments, if any, in 195758, and in subsequent years, 90 per cent of the average standard tax yield plus equalization and stabilization payments, if any, in the two preceding years. 3. Where a provincial government undertakes not to impose or permit its municipalities to impose taxes in the personal income tax field, or the corporation tax field or the succession duty field, the federal government would pay to such provincial government each year an amount equal to the yield of the standard tax in that field in that province. 4. Where a provincial government prefers to impose and collect its own taxes in any of these three fields at whatever rates it chooses, the federal government would abate the rate of federal tax in that field in that province by the standard rate. 5. Where a provincial government chooses to impose and collect corporation taxes, other than a general tax on profits, the federal

Dominion-Provincial Relations government in determining the taxable income of a corporation would not allow as an expense provincial corporation taxes on that corporation up to 9 per cent of its taxable income or up to the general rate of corporate income tax levied by the provincial government, whichever is the greater. Where the total provincial corporation taxes paid by a corporation exceed such level, such excess would be allowed as an expense to the corporation. The cost to the federal treasury of allowing such excess as a corporate expense would be deducted from any payments due to the provincial government arising out of these proposals. 6. The standard rates proposed are: (a) On personal incomes, 10 per cent of the federal tax under the Income Tax Act (i.e. excluding the old age security tax); (b) On corporations, 9 per cent of the taxable income deemed to be earned in the province; (c) On successions, 50 per cent of the federal duty. (In calculating equalization payments, it is proposed to average the yield of succession duties over a period of three years.) 7. In calculating equalization payments, stabilization payments or rental payments under numbered paragraphs 1, 2 and 3, the standard rates of personal income tax and succession duty would be adjusted upward or downward each year, if necessary, in order to offset any future changes in either the rates of tax or personal exemptions resulting from future amendments to the Income Tax Act or the Succession Duty Act. We propose that these arrangements be for a period of five years commencing April 1, 1957. These proposals provide revenues to the provinces somewhat greater than those available under the present tax-rental system; they provide for revenues increasing with the growth and expansion of our country; and they guarantee a measure of stability in this sector of provincial revenues more effectively than do the present arrangements. They also make it possible for any provincial government so desiring to secure these revenues in these tax fields without the necessity of imposing and collecting its own taxes. It would, I think, be useful to have our committee of officials meet as early in February as possible to clarify the technical details of these proposals. I would be glad to hear from you in due course. Yours sincerely,

(Similar letter sent to alt provinces) OFFICE OF THE PRIME MINISTER Ottawa, December 5, 1955. The Honourable Leslie M. Frost, Premier of Ontario, Toronto, Ontario. My dear Premier: My colleagues and I have been considering changes in the draft unemployment assistance agreement proposed by a number of provinces in earlier correspondence and in discussions held with federal officials during the week of October 3rd. We have now approved a revised draft agreement, two copies of which I am enclosing with this letter. In revising the draft agreement, we have sought to meet all the points raised by provincial representatives in so far as they would help to assure to all provinces, with their wide variety of institutions and procedures for providing relief, an equal measure of federal participation. In all cases where changes have been made it will be noted that the revised text offers somewhat more favourable terms to the provinces than was the case in the original draft of last August. No change is contemplated in the formula designed to meet the special situation in Nova Scotia as set forth in my letter to you of August 26th. The attached agreement was drafted in such a manner that it may be given effect from July 1st, 1955, or whatever later date may be preferred by each provincial government. In the event your government decides to enter into an agreement on the basis of this revised draft, would you please arrange to have both the attached copies signed or initialled by your appropriate minister and returned to the Minister of National Health and Welfare for completion on behalf of the federal government and one of the copies will then be returned to you for your records. Before sending the signed or initialled copies to Mr. Martin, paragraph 17 should, of course, be completed to indicate whether you wish the agreement to come into force on July 1st, 1955, or at some later date, and also whether the agreement with your province is to run for a term certain of five years or some lesser period. Following completion of the agreement, the appropriate officers of the federal government will work out with the officials of whatever department you may designate the detailed administrative procedures for the submission of monthly reimbursement claims, beginning with the month in which the agreement takes effect. Federal authority to make the actual reimbursement payments will, of course, have to await the passage of legislation at the next session of parliament beginning January 10th, 1956. Yours sincerely,

Drajt agreement as submitted on December 5, 1955 to all provinces except Nova Scotia: Memorandum of Agreement Respecting Unemployment Assistance made this day of 19 . Between: The Government of Canada, hereinafter called "Canada", Of the First Part and The Government of the Province of , hereinafter called , Of the Second Part Whereas Canada and are desirous of entering into an agreement for the purpose of providing assistance to unemployed persons who are in need, and for the sharing of the costs thereof; Now, therefore, this agreement witnesseth that in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto hereby covenant and agree each with the other as follows: 1. In this agreement, unless the contrary intention appears, (a) "province" means the province of "(b) "municipality" means a municipal corporation in the province and includes any city, town or local governmental body established under the authority of the law of the province and authorized to administer assistance to unemployed persons who are in need; (c) "a recipient of mother's allowance" includes (i) a dependent child of a person receiving a mother's allowance if such child is within the age group for whom provision is made under the law of the province that provides for the payment of mothers' allowances; and (iil the husband of a person receiving a mother's allowance if an allowance is being paid on his behalf under the law of the province that provides for the payment of mothers' allowances. Dominion-Provincial Relations (d) "population" means, except in subparagraph Ca) of paragraph 13, the most recent estimate of the population of the province made by the Dominion Bureau of Statistics and published by the Queen's Printer at Ottawa prior to the month to which the reimbursement claim relates; (e) "homes for special care" means nursing homes, hostels for indigent transients, homes for the aged, poor houses, alms houses and hostel facilities provided for the aged within housing projects constructed under the provisions of the National Housing Act; and (f) words in the singular include the plural and words in the plural include the singular, 2. At the first session of Parliament following the execution of this Agreement, Canada shall introduce and recommend the enactment of such legislation as may be required to enable Canada to give effect to this Agreement, and at the first session of the Legislature of the province following the execution of this Agreement shall introduce and recommend the enactment of such legislation as may be required to enable to give effect to this Agreement. 3. shall make all the necessary arrangements for (a) the receipt, by itself or by municipalities, of applications for assistance from unemployed persons in the province, and . (b) the verification of the representations made by applicants and the province shall assume responsibility for the correctness of such representations. 4. shall make available to officials of Canada particulars of (a) the conditions prescribed by or by municipalities under which assistance may be given to persons in need, and (b) the rates of assistance payable. 5. Length of residence shall not be made a condition for the receipt of assistance if (a) the applicant has come from a province whose government has entered into an agreement similar to this respecting unemployment assistance, and (b) such agreement includes a like clause as herein contained in respect of length of residence not being a condition for receipt of assistance. 6. shall deliver to the Minister of National Health and Welfare, at Ottawa, a monthly statement, hereinafter referred to as a reimbursement claim, in such form as'Canada may require, indicating, inter alia, (a) the total number of persons who are unemployed and in need in the province, including their dependents, who have received 26 HOUSE OF Dominion-Provincial Relations assistance during the month to which the reimbursement claim relates, and (b) the total amounts paid to or on behalf of such persons during the month to which the reimbursement claim relates. 7. shall keep a record of the names and addresses of any persons and of the number of their dependents who have received assistance and the particulars of such assistance, which record shall be made available for examination on request by officials of Canada. 8. There shall be excluded from the reimbursement claim any person, together with any payment made to or on behalf of such person, who is (a) an inmate in any institution maintained in whole or in part out of funds appropriated by (i) the Parliament of Canada, (ii) the Legislature of the province, (iii) a municipality, or (iv) a charitable organization; except that there may be included in the reimbursement claim payments made by the province or by a municipality for the upkeep of inmates in homes for special care and the number of persons in respect of whom such payments are made, provided that said inmates are unemployed and in need and the payments claimed do not exceed what an individual might reasonably be expected to pay for accommodation of a comparable kind and quality in the same locality and provided further that said inmates are not such as would normally be cared for in general, acute, chronic or convalescent hospitals, tuberculosis sanatoria, mental institutions, institutions for incurables, orphanages or child welfare institutions; (b) a person in receipt of (i) unemployment benefit under the Unemployment Insurance Act, (ii) a pension under the Old Age Security Act, (iii) assistance under the Old Age Assistance Act, (iv) an allowance under the Blind Persons Act, (v) an allowance under the Disabled Persons Act, or (vi) a supplemental allowance or cost-of-living bonus provided under the law of the province to recipients of benefit under any of the aforementioned acts; or (c) a recipient of mothers' allowance.

9. Notwithstanding sub-paragraph (b) of paragraph 8 there may be included in the reimbursement claim any additional relief payments made by the province or by a municipality to persons described in the said sub-paragraph and the number of persons to whom such payments are made if such persons are unemployed and in need. 10. There shall also be excluded from the reimbursement claim payments made in respect of (a) medical, hospital, nursing, dental and optical care and drugs and dressings, (b) funeral expenses, (c) all travelling expenses except those, if Canada is not contributing thereto under some other arrangement, that are made for the purpose of (i) returning a recipient of unemployment assistance and his dependents, if any, to his normal place of residence under an arrangement to which the municipality or the government of the province to which he is being returned has agreed in advance, (ii) enabling a recipient of unemployment assistance or dependent member of his family to obtain assured employment as certified by the National Employment Service, or (iii) enabling a recipient of unemployment assistance or a dependent member of his family to obtain needed medical, hospital or nursing home care which cannot be provided at his normal place of residence; and (d) the cost of administration. 11. There shall be deducted from the reimbursement claim (a) an amount calculated by multiplying the average per person monthly cost of assistance by -45 per cent of the population, and (b) an amount calculated by multiplying the average per person monthly cost of assistance by the decrease in the number of recipients of mothers' allowances. 12. The average per person monthly cost of assistance shall be calculated by dividing the total of the payments made during the month, as set forth in the reimbursement claim, by the total number of persons, including dependents, who received assistance during the said month as set forth in the reimbursement claim. 13. For the purpose of sub-paragraph (b) of paragraph 11, the decrease in the number of recipients of mothers' allowances shall be calculated as follows: (a) the average monthly percentage of the population of the province who were recipients of mothers' allowances during each

twelve-month period from the first day of July 1945, to the thirtieth day of June prior to the month to which the reimbursement claim relates shall be determined, and in determining these percentages the latest estimate made by the Dominion Bureau of Statistics and published by the Queen's Printer at Ottawa of the population of the province on the first day of June or nearest date thereto in each twelve-month period shall be used; (b) the average monthly percentage determined for the twelve-month period ending the thirtieth day of June immediately preceding the month to which the reimbursement claim relates shall be subtracted from the highest percentage ascertained pursuant to sub-paragraph (a) of this paragraph in respect of any other twelve-month period; (c) from the difference ascertained pursuant to sub-paragraph (b) of this paragraph there shall be subtracted -10 per cent; (d) the difference ascertained pursuant to sub-paragraph (c) of this paragraph shall be multiplied by the population; and (e) in the event that the calculation in subparagraph (c) of this paragraph results in a negative quantity, sub-paragraph (b) of paragraph 11 shall have no application. 14. The reimbursement claim shall (a) be submitted within six (6) months next following the last day of the month to which it relates, but no claim submitted by in respect of any month prior to the actual date on which this agreement is executed shall be disqualified solely on the ground that it was not submitted within the said six (6) months, and (b) contain the following certificate signed by the provincial auditor: "I hereby certify that this claim for reimbursement has been prepared in accordance with the terms and conditions set forth in an agreement respecting unemployment assistance dated the day of 195 , and made between the Government of Canada and the Government of the province of ". 15. Canada shall, on receipt of a reimbursement claim that has been prepared in accordance with this agreement, pay fifty (50) per cent of the total claim. 16. In the event of any controversy arising between Canada and in respect of this agreement, either party may submit such controversy to the Exchequer Court of Canada for determination. 17. This agreement shall be deemed to have come into force and shall bind the parties from the day of 195 ,to the day of 19 ,11, 1956 Dominion-Provincial Relations and thereafter until terminated by either party giving to the other party one year's notice in writing. 18. Any notice given pursuant to paragraph 17 may be communicated as follows: (a) to Canada, by registered mail addressed to the Minister of National Health and Welfare, at Ottawa; and (b) to by registered mail addressed to the Premier of the province at In Witness Whereof the Honourable Paul Martin, Minister of National Health and Welfare, has hereunto set his hand on behalf of the Government of Canada and the Honourable Minister of of has hereunto set his hand on behalf of the Government of the province of Signed on behalf of the Government of Canada by the Honourable * Minister of in the presence of Signed on behalf of the Government of the province of by the * Honourable Minister of in the presence of Draft agreement as submitted to Nova Scotia on December 5, 1955: (See Clause 11 (a)) Memorandum of Agreement Respecting Unemployment Assistance made this day of 19 . Between: The Government of Canada, hereinafter called "Canada", Of the First Part and The Government of the Province of , hereinafter called Of the Second Part Whereas Canada and are desirous of entering into an agreement for the purpose of providing assistance to unemployed persons who are in need, and for the sharing of the costs thereof; Now, therefore, this agreement witnesseth that in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto hereby covenant and agree each with the other as follows: 1. In this agreement, unless the contrary intention appears, (a) "province" means the province of 28 HOUSE OF Dominion-Provincial Relations (b) "municipality" means a municipal corporation in the province and includes any city, town or local governmental body established under the authority of the law of the province and authorized to administer assistance to unemployed persons who are in need; (c) "a recipient of mother's allowance" includes (i) a dependent child of a person receiving a mother's allowance if such child is within the age group for whom provision is made under the law of the province that provides for the payment of mothers' allowances; and (ii) the husband of a person receiving a mother's allowance if an allowance is being paid on his behalf under the law of the province that provides for the payment of mothers' allowances. (d) "population" means, except in subparagraph (a) of paragraph 13, the most recent estimate of the population of the province made, by the Dominion Bureau of Statistics and published by the Queen's Printer at Ottawa prior to the month to which the reimbursement claim relates; (e) "homes for special care" means nursing homes, hostels for indigent transients, homes for the aged, poor houses, alms houses and hostel facilities provided for the aged within housing projects constructed under the provisions of the National Housing Act; and (f) words in the singular include the plural and words in the plural include the singular. 2. At the first session of Parliament following the execution of this Agreement, Canada shall introduce and recommend the enactment of such legislation as may be required to enable Canada to give effect to this Agreement, and at the first session of the Legislature of the province following the execution of this Agreement shall introduce and recommend the enactment of such legislation as may be required to enable to give effect to this Agreement. 3- shall make all the necessary arrangements for (a) the receipt, by itself or by municipalities, of applications for assistance from unemployed persons in the province, and (b) the verification of the representations made by applicants and the province shall assume responsibility for the correctness of such representations. 4- shall make available to officials of Canada particulars of (a) the conditions prescribed by or by municipalities under which assistance may be given to persons in need, and (b) the rates of assistance payable. .